Posts Tagged ‘Pennsylvania’

AUGUST 15, 2016 VOLUME 23 NUMBER 30
You’ve signed your will. We’ve given you the original in a fancy envelope, and a copy showing your signatures. What should you do with it?

For most people, most of the time, it is sufficient to just keep the original will in a convenient place at home. What to do with the copy? Put it in a different, but also safe, place. Include a note telling your family where to look for the original.

What happens if we can’t find your will after you die? It may not mean that your estate plan is frustrated, but consider what happened to estate planning documents signed by Irene Wilson (not her real name).

Irene was a librarian and an author of children’s books, and she lived in Maryland. She never married, and had no children. She did have a niece and a nephew — her closest relatives — but she was not particularly close to them.

After her retirement, Irene moved to rural Pennsylvania. By age 87 she was still living at home but unable to easily get up her stairs; she set up a first-floor bedroom for herself. She also had a cousin who lived upstairs and helped take care of her.

In 2007 Irene contacted a local Pennsylvania lawyer about updating her will. She named a long-time friend as executrix (what we in Arizona would call personal representative) and left most of her estate to her church back in Maryland. Three years later she updated the will with a new codicil, naming her live-in caretaker as execturix; at the same time she transferred her home to the church she attended in Pennsylvania, reserving a life estate for herself.

Both the original will and the original codicil were carefully placed in an unlocked metal box near her bedroom on the first floor; “conformed” copies of both were in a locked safe in an upstairs bedroom. The attorney who prepared both documents also kept a “conformed” copy.

Pause a moment for explanation: what is a “conformed” copy? In modern usage, it is a photocopy of the original, unsigned document, with a notation like “/s/” placed on the signature blocks. Sometimes a stamped representation of the signer’s name is placed on the signature block. In either case, it indicates that the original was signed — though the signature itself is not usually copied.

Six months after Irene signed her will and placed her conformed copies near her downstairs bedroom, her niece came for a visit. It did not go well. The niece told Irene that there were important family documents and heirlooms that she wanted to receive on Irene’s death. She also told Irene that she should move out of her house and into a nursing home. Irene was upset by the visit, and by the follow-up phone calls from her niece.

A few months after the niece’s visit, Irene’s lawyer called on her at home. She did not say anything about wanting to change or revoke her will, or about any changes in her plans.

Irene died a week after the lawyer’s home visit. When her caretaker went to the house to retrieve the original will, she found an empty envelope in the downstairs box, and all of the papers missing from the safe upstairs. Oddly, the original codicil and some other papers were still in the downstairs box; the copies of those documents were missing from the safe.

Let’s stop here for a moment for reflection. Did Irene have a valid will? Can the copy of her will from her lawyer’s file be admitted to probate?

Ready to proceed? Do you have your answer?

There is a presumption under Pennsylvania law (which governed Irene’s probate case, since she lived and died in that state) that when an original will was in the decedent’s possession before death but can’t be found. The presumption makes sense: it is that the decedent must have destroyed the original with the intent to revoke it. The same presumption, by the way, exists under Arizona law (and, probably, under the probate laws of most or all of the U.S. states).

The Pennsylvania probate court (it’s actually called orphan’s court, but no matter) ruled that the evidence suggested that Irene had not intended to revoke her will, and the lawyer’s conformed copy was admitted to probate. The next level of review, however, resulted in the opposite outcome: the Pennsylvania Superior court reversed, ruling that two witnesses would have had to testify that they actually saw Irene sign the original document. That meant the will was invalid, though the codicil (which was still intact in the metal box) would be effective. Irene’s caretaker would be in charge of her estate, but her niece and nephew would inherit most of her wealth.

Was that your prediction? If not, then you might take comfort in the next step. The Pennsylvania Supreme Court reversed the intermediate ruling, returning the outcome to the probate court’s finding: the copy of Irene’s will was, after all, admitted to probate. The Supreme Court found that the lawyer’s testimony about witnesses to the original will was sufficient — there was no need to produce the actual witnesses to testify about the signing. In re Estate of Wilner, July 24, 2016.

Would the same thing happen in Arizona? Yes, almost certainly. Given how easy it is to make photocopies, most lawyers today would have copied the will after signature rather than making conforming marks on a copy, but the outcome would not be different in most cases. The key is whether there is a legitimate explanation about why the original might be missing, more than whether specific technical requirements have been met.

So what should people do with their original wills? Put them in a safe place. Tell someone — the person named as personal representative, close family members, or someone — where the originals are located. Keep track of originals over the years (do you know where your original will is right now?). But what happened to Irene is unlikely to happen if you are leaving your entire estate to your children in equal shares (or to your only niece and nephew).

It might seem odd that interstate problems in probate proceedings arise. After all, we have had 50 states and a handful of other jurisdictions gathered together in the United States for a half-century, and nearly that many for most of the two centuries before that. Shouldn’t differences in probate interpretations been ironed out by now?

Not necessarily. Perhaps it is a result of the fact that Americans are much more mobile today than they were even a few decades ago. Perhaps it is partly because of improvements in communication, letting interstate issues rise to the surface more readily. For whatever reason, a recent case involving Pennsylvania and Connecticut demonstrates that there can still be uncertainty about application of probate principles.

Rose and Mae (we’ll leave their last names out of this explanation), sisters, lived together in a house in Philadelphia for many years. They jointly owned their home, and they also were two of five joint owners of a farm in Connecticut. The farm was an inheritance, still held in the names of Rose, Mae, their brother Stephen, their sister Alyce, and a nephew (John) who had inherited his father’s share.

At Christmas time in 2000, while Rose was recovering from a stroke, Stephen sent a card to his sisters. He urged them to do some estate planning, since if they failed to do so “the lawyers would have a field day” and there estate taxes would be very high. He was wrong about that last assertion, incidentally, but that is not the point of our story.

In any event, Rose responded to her brother’s suggestion by dictating the language of a will to Mae’s son, who lived nearby. He wrote out her will, she made a few changes (adding her middle initial, for instance) and signed the document. She did not have it witnessed, and did not talk to an attorney about improving the quality of her will — she lived another six years, but did not update the document.

After Rose’s death (and after Mae entered a nursing home), Mae’s son initiated a probate proceeding in Pennsylvania, where Rose had lived and died. He sought admission of the handwritten document as a “holographic” will; Pennsylvania law recognizes such documents even if they are not signed by two witnesses. Initially John, Stephen and Alyce (Rose’s nephew and two siblings) objected to the Pennsylvania probate, but then they withdrew their objections. The will was admitted to probate in Pennsylvania.

Then Mae’s son filed an action in Connecticut to have the Pennsylvania probate proceeding recognized there. Such a proceeding is called an “ancillary” probate, meaning that it relies on the validity and rulings of the court in another state (the “domiciliary” state). John, Stephen and Alyce objected, arguing that Connecticut law does not permit holographic wills. They also argued that evidence showed that Rose was unduly influenced, and that Connecticut public policy did not favor wills such as Rose’s.

The Connecticut trial court ruled that the question was not whether Rose’s will would satisfy Connecticut law, but whether it had been found to be valid in Pennsylvania. Since it had, said the judge, the only issue was whether there was sufficient reason to challenge that ruling — finding none, the will was admitted and effectively transferred Rose’s interest in the inherited family farm to Mae’s family.

The Appellate Court of Connecticut agreed with the trial judge, and upheld his ruling (interestingly, only nephew John had appealed, not that it actually matters). The result: Rose’s holographic will, not itself valid in Connecticut, was effective to pass Connecticut property because it was valid in Pennsylvania and admitted to probate there.

The appellate judges noted that the common law rule had been different. Until the 1850s, when Connecticut had expressly adopted a statute recognizing the validity of wills which were valid when and where they were executed, a will would not be effective to pass Connecticut real property unless it met that state’s tests for validity. For the past 150 years, though, Connecticut had expressly approved out-of-state wills that met their local requirements for execution. Goodwin v. Colchester Probate Court, January 19, 2016.

Would Arizona courts reach the same conclusion? From the description, for instance, it appears that Rose’s holographic will would not meet Arizona’s requirements for admission to probate (Arizona is one of the states that, like Pennsylvania, recognizes holographic wills — but they have to meet Arizona’s requirements). If Rose had held real estate in Arizona, would her will have been effective? Although the precise question has not been addressed in Arizona, the result should be the same — though there is one 70-year-old Arizona case that might support an opposing argument.

Another point needs to be made: we are constantly surprised that people might leave their estates in such disorder as to trust handwritten notes which might be subject to dispute. In the six years after her brother suggested she ought to plan her estate, could Rose not find an hour to visit a lawyer to get good advice? For that matter, couldn’t she have undertaken that project sometime in the decades before her brother’s suggestion?

It is perhaps not too surprising that Rose might want to leave the bulk of her estate to her sister (with whom she lived) and her sister’s family. It is only surprising that she left her affairs in a condition that enhanced the likelihood that “the lawyers would have a field day,” and that she would create legal disputes among her family members. It would have been so easy to avoid that result.

Not every client we speak with wants to set up a trust for generations of descendants, but some do. The notion of allowing assets to grow for two or three (or more) generations can be attractive.

It is difficult, of course, to imagine what one’s grandchildren and great-grandchildren will be like when they grow up. There’s another challenge that is less obvious, though — what will the economy, the legal environment, and the very notion of trust planning look like in, say, 80 years?

We’re not particularly good at predicting the look of the landscape at the turn of the next century, but occasionally we get a little insight into the problem when considering the plans made several generations ago. Trusts can easily live for a century, and the problems facing trust beneficiaries today might or might not have been considered when those trusts were drafted.

That’s what Pennsylvania’s intermediate appellate court had to deal with in a recent case it considered. At issue was the trust established by Edward Winslow Taylor in 1928. Mr. Taylor died in 1939, and the trust became irrevocable. It continues — altered in at least two fundamental ways — since then.

Originally, the trust named The Colonial Trust Company as trustee. Two years later he amended the trust to change the trustee to The Pennsylvania Company for Insurance on Lives and Granting Annuities as trustee, since it had assumed the business of the initial trustee in a merger. In the following eight decades, a series of mergers and buyouts had left Wells Fargo Bank, a national bank and trust company, as trustee.

The trust initially paid its income to Mr. Taylor’s daughter, Anna Taylor Wallace. When she died in 1971, she used her power to direct the trust income to her oldest son, Frank Wallace, Jr. Upon his death in 2008, the trust was divided into four separate trusts — one for the benefit of each of his children, with each then being worth a little less than $2 million. Each trust will continue until 2028.

A lot has changed in the practice and law governing administration of trusts since the 1920s. As just the latest illustration, Pennsylvania, where these trusts are administered, has adopted the Uniform Trust Code (as has Arizona). Trusts written almost a century ago seem hopelessly dated today.

Two years ago, three of the four trust beneficiaries suggested updating the language of the trust to reflect more modern thinking. One change they wanted to make: they argued that the trust should be modified to allow the four of them, if they chose, to change the trustee from Wells Fargo to a new corporate trustee.

Though no beneficiary objected to the change, Wells Fargo did object. The bank convinced the Philadelphia judge that the new Pennsylvania Trust Act did not allow such a change, even if the beneficiaries had all agreed. The beneficiaries appealed.

In the appellate court, the beneficiaries argued that all they were doing was to modernize the trust’s language. The inclusion of a power to change trustees, they insisted, would be considered commonplace today. Furthermore, the Pennsylvania version of the Trust Code clearly permitted modifications so long as all beneficiaries (and the original settlor, if he had still been living) agreed.

Not so fast, insisted Wells Fargo. The scholars who drafted the Uniform Trust Code had clearly indicated that their intention was not to permit a change of trustee by modification of the trust document — even if all the beneficiaries did agree. The bank pointed to the comments written by the uniform code’s drafters in support of their argument.

The appellate court, in a split (2-1) decision, sided with the beneficiaries. According to the majority opinion, the comments written by the drafting committee shouldn’t even be consulted unless there is ambiguity in the language of the statutes. Here, there is not — the Pennsylvania Trust Act permits beneficiaries, acting together, to make a change that includes the power to change trustees.

The dissenting judge would have found that removal of a trustee is a different matter from other trust amendment provisions. In fact, the Pennsylvania statute includes a specific method for trustee removal — and the agreement of the beneficiaries is not a method included in that separate statute. The specific trustee removal provision should have governed over the general modification provision, in the view of the dissenting judge. Trust of Edward Taylor, September 18, 2015.

As we note above, Arizona has also adopted a version of the Uniform Trust Code. Does that mean that an Arizona case would be decided the same way? Perhaps not.

Arizona made small but significant changes to the uniform law before adopting it. Those changes might well compel the opposite result — and particularly where the question appears to have been a close question even under Pennsylvania’s version of the uniform law.

Nonetheless, we like to see discussion about the Edward Winslow Taylor case, for at least these three reasons:

It highlights how much hubris is involved when we “plan” for management of assets a century or so after our own demise. That doesn’t mean it can’t be done, or even that it shouldn’t be tried — but it does remind us that flexibility is key.

We presume that Mr. Taylor was a descendant of Edward Winslow — a signer of the Mayflower Compact. While we’re not descended from Mr. Winslow, we are descended from his sister. It makes us feel proud to see that this (our) patrician family remains relevant today.

“We” in this case means your author and his brother Steven. Not only does Steven now live in Philadelphia (where Mr. Taylor’s trust is administered and was litigated), but October 19 (the day of publication for this little newsletter) happens to be his birthday. It’s a small world, with plenty of odd circles to keep us mildly entertained (and by “us”, here I mean me).

We see the same sad story time and again. Sometimes there are small variations, but it almost always starts the same way. Aging parents (or other relatives) need assistance with their finances and their care. As those needs increase, family members begin — often with the very best of intentions — to provide assistance but end up taking advantage. The transition from loving support to financial exploitation is tragic and common.

At least that’s the way we’d like to think Gary and Sheila Taylor of Belton, Missouri, started out. When Mr. Taylor’s father sold his home in Pennsylvania and moved in with his son and daughter-in-law, it looks like everyone thought they would be providing care for him in their home. That was what the son apparently told his two sisters, anyway.

The elder Mr. Taylor had lived in Pennsylvania all his life. His second wife became seriously ill in 1997, and daughter-in-law Sheila Taylor traveled to his home to help out. He signed a new power of attorney naming Sheila as his agent. He added her name to two of his bank accounts in Pennsylvania. When his wife died, he and his son and daughter-in-law agreed it would be better if he moved to Missouri with them.

A few months later, bank accounts in Missouri bore father, son and daughter-in-law’s names. Gary and his father sent $10,000 checks to each of Gary’s sisters, with a note indicating that Mr. Taylor was trying to avoid the probate process. Then the elder Mr. Taylor suffered a stroke, and his care needs escalated.

While Mr. Taylor was still recuperating from his stroke, Sheila wrote a $7,100 check to pay off a credit card in her and Gary’s name. Then she and Gary decided to purchase a farm property and to build a new house on the property that would allow Mr. Taylor to move in. Mr. Taylor’s money paid for the property and construction — and also for a tractor, a utility vehicle and a herd of cows. All were in Gary and Sheila’s names, with no mention of Mr. Taylor’s contribution. Not too long thereafter, Gary and Sheila Taylor did some ironic estate planning of their own, transferring “their” assets into a revocable living trust.

Mr. Taylor ended up living on the farm he had purchased for about six months before going to a nursing home. When he died a few months later, there were no assets left in his name to go through the probate process. Almost $400,000 of money that had once belonged to him had gone into the farm, house, equipment and cows titled in Gary and Sheila’s revocable living trust. Mr. Taylor’s daughters sued, and argued that they should be entitled to a portion of the farm — and even of the cattle herd.

The Missouri Court of Appeals agreed. The appellate judges explained the legal notion of a “constructive trust”—and then ordered that the trial court conduct a new hearing to determine how much of the property belonged to Mr. Taylor’s daughters. Taylor-McDonald vs. Taylor, January 10, 2008.

When the legal system takes over decision-making and care of an incapacitated adult, there is a struggle between competing goals. It is important to provide adequate protection and supervision, but it is also important to maintain the ward’s personal autonomy and self-determination. It is often difficult to decide how much latitude to give to an incapacitated ward. Even the court system charged with overseeing that balancing act can sometimes be too restrictive.

Sheri Rosengarten was the subject of a guardianship in Pennsylvania. Before the onset of her mental illness she had established a revocable living trust naming herself and her brother David as co-trustees. Unfortunately, her brother had mismanaged her trust assets after she became incapacitated, and so her personal and legal affairs were in some disarray.

The court appointed a non-family member, lawyer Susan B. Smith, to serve as Ms. Rosengarten’s guardian (of both her person and estate—what would be called a guardian and conservator in Arizona). Thereafter Ms. Smith began to manage Ms. Rosengarten’s personal and financial affairs, although assets in her living trust were being managed by her father as successor trustee.

Because Ms. Rosengarten was in an assisted living facility, her guardian decided it was time to sell her residence and add the proceeds to the assets under management. Ms. Rosengarten objected (as did her father), thinking that she might some day be improved enough to return to her home. In the meantime she thought it made sense to rent the house out—perhaps as a group home that could be tailor-made for her as her condition improved.

Although the court had appointed an attorney to represent Ms. Rosengarten in the guardianship proceeding, she wanted to choose a different attorney and argue against the sale of her home. The court, however, refused to hear from the lawyer she had hired, insisting that the attorney previously appointed could represent her interests. After a brief hearing the judge ordered that Ms. Rosengarten’s home should be sold, and the proceeds delivered to Ms. Smith rather than held in her living trust.

The Pennsylvania Superior Court (that state’s intermediate appellate court) reversed the trial judge’s holdings and remanded the case back to the trial court. Once she had raised the argument that she was no longer incapacitated, said the appellate judges, the first question to be addressed was whether a guardianship was still necessary. At that hearing Ms. Rosengarten should of course be allowed to choose her attorney unless it could be shown that she lacked capacity to even enter into a lawyer-client relationship, and her wishes should be respected to the fullest extent possible. Estate of Rosengarten, March 24, 2005.

Carmen DiCesare, age 82, may have been a little confused when he visited the local branch of Prudential Savings Bank in south Philadelphia that day in August, 2000. By the time he left the bank he had made major changes in his estate plan, and the bank’s branch manager and assistant branch manager had benefited from Mr. DiCesare’s situation.

What Mr. DiCesare apparently wanted to accomplish was to arrange for direct deposit of his Social Security checks into a passbook savings account at Prudential. Frances Mazzei, the branch manager, told him that he would need to have his original passbook with him to set up the direct deposit account, and he told her that he had lost the book. She then helped him to open a new account, and to transfer his existing Prudential account balances.

One of the documents Mr. DiCesare signed that day was a note prepared by Ms. Mazzei that said “I want to put the account in trust to Frances Mazzei and Lucia Sqiieri.” Ms. Squitieri (the note misspelled her name) was the assistant branch manager. The two women even called bank President Thomas Vento to check on whether the account titling was permissible; Mr. Vento did not advise them not to set up the account. The two women then held on to Mr. DiCesare’s passbook, giving him only a copy.

The “in trust for” language, of course, meant that the two women would receive Mr. DiCesare’s account upon his death. They assisted him in transferring almost $250,000 into the new account, and then moved $430,000 from another bank into the account. The balance was then $680,454.63, with another $709 deposited each month by Social Security.

After recovering $156,000 from Ms. Mazzei and Ms. Squitieri, the estate obtained a judgment against them and the bank for the remaining balance. Prudential and the two women appealed.

The Pennsylvania Superior Court upheld the judgment against all three defendants. The court quickly determined that Mr. DiCesare was vulnerable, and that Ms. Mazzei and Ms. Squitieri had developed a relationship of trust with him that made them liable for the loss.

As for the bank’s liability, the court ruled that Mr. DiCesare’s estate did not have to show that Prudential had violated any law or regulation. The fact that senior management knew what the two branch officers were doing, and did nothing to stop their actions or even inquire, was enough to make Prudential liable for the entire $563,767.40 judgment. Owens v. Mazzei, April 7, 2004.